The Protection of Trade Secrets in China under the Global Financial Crisis

Transcription

1 The Protection of Trade Secrets in China under the Global Financial Crisis -from the Perspective of Rio Tinto case SHAN Hailing Shanghai University of Finance & Economics, Law School, China

2 Brief Explanation of Rio Tinto Case- Determination of the Charge and Some Legal Opinions Rethinking the Protection of Trade Secrets in China

3 I. Brief Explanation of Rio Tinto Case- Determination of the Charge and Some Legal Opinions

4 The Definition of State Secrets and Trade Secrets in China s Law The Legal Remedy of Trade Secret Infringement in China Espionage and Economic Espionage in China

5 1. What is the State Secret in China? State secrets shall be matters that have a vital bearing on state security and national interests and, as specified by legal procedure, are entrusted to a limited number of people for a given period of time. Article 2 of the Law of the People s Republic of China on Guarding State Secrets, effective May

6 Two characteristics: it is the classified information concerning State security and national interests which includes: Major policy decisions on state affairs National defence and the activities of the armed forces, Diplomatic activities National economic and social development Science and technology State security activities and investigation of criminal offences Other matters that are classified as state secrets by the state secret protection department.» Article 8 of the Law of the P.R.C. on Guarding State Secrets

7 Legal procedure State Secrecy Bureau shall made the specific scope of state secret and categories of confidentiality as well as define the level of confidentiality in conjunction with related ministries and commissions directly under the Central Committee and State Council. The specific scopes and categories of state secrets related to national defence shall be stipulated by the Central Military Commission. Stipulations on the specific scopes and categories of state secrets shall be made known within relevant quarters. Article10 State organs and units at various levels shall, in accordance with the stipulations on the specific scopes and categories of state secrets, classify the state secrets arising in these organs and units. Article 11

8 State Secrecy Bureau, together with related certain State authorities, has made 89 stipulations on state secrets and scope of confidential level, which covers various trades, fields and provide as a basis on state secret confirmation for secret-determination work for state organs and units.

9 The Provisions of Metallurgical Industry Specific Scope of State Secrets and other Secrets(1995): unreported quota of long-term development plan in metallurgical industry nationwide; all provinces and municipalities; policies and measures to realize the quota; unreported critical data and important policy measures in professional plans of metallurgical industry.

10 Rio Tinto Case inside information regarding production schedule steelmaking mixture ratio procurement program gross profit rate stocks of Chinese iron and steel industry in particular the vital information as countermeasure skill in iron ore procurement negotiations and bottom line If the alleges can be verified, these information obviously belongs to China state secrets.

11 The Definition of Trade Secret in China s Law "trade secret, in this article, means the utilized technical information and business information which is unknown by the public, which may create business interests or profit for its legal owners, and also is maintained secrecy by its legal owners. article 10 of Law of the People's Republic of China Anti-unfair Competition Law

12 Three elements Practicality and commercial value Confidentiality Magageablility Provisions contained in article 39 of the TRIPS Agreement

13 2. The Legal Remedy of Trade Secret Infringement in China crime of violation of trade secrete; crime of stealing, secretly gathering, purchasing, or illegally providing state secrets or intelligence for an organization, institution, or personnel outside the country; crime of state secret divulgence by intention or negligence.

14 crime of violation of trade secrete : not less than 3 years of fixed-term imprisonment or criminal detention, penalty concurrently or separately; If particularly serious: not less than 3 years to not more than 7 years of fixed- term imprisonment, and penalty concurrently. (Article 219) crime of stealing, secretly gathering, purchasing, or illegally providing state secrets or intelligence for an organization, institution, or personnel outside the country : not less than 5 years to not more than 10 years of fixed-term imprisonment; if particularly serious, he/she is to be sentenced to not less than 10 years of fixed- term imprisonment, or life sentence; (Article 111) crime of state secret divulgence by intention or negligence. not more than 3 years of fixed-term imprisonment or criminal detention; if exceptionally serious, not less than 3 years and not more than 7 years of fixed-term imprisonment. (Article 398)

15 3. Espionage and economic espionage in China crime of espionage in China s Criminal law refers to participation in espionage organization or acceptance of tasks of espionage organization and its agency independent charge of economic espionage hasn t been established in the current Chinese criminal law

16 Conclusion Judging from the current legal regulations and case details, the four persons of Rio Tinto case are accused of infringing the trade secret, if the evidence proves the secret to reach the state secret level, they could be convicted of state secret violation.

17 Challenges for trade secrets protection under the global financial crisis: How to improve the capability of protecting trade secrets of each enterprise How to decrease the loss cause by former employees leaving How to keep an open, fair and competitive market

18 II. Rethinking the Protection of Trade Secrets in China under the financial Crisis

19 The Relationship between State Secret and Trade Secret in China The Function and Status of Criminal Penalties in the Protection of Trade Secrets The Legal Nature of the Employee s Obligation of Confidence in respect of Trade Secrets and of Non-Competition Obligation

20 1. The Relationship between State Secret and Trade Secret in China

21 Difference Legal nature Criteria Transfer Measure of protection Legal liability State secret Public right Special legal procedure Permission from certain State authorities. Provided by law and enforced at every level of government Criminal charge Trade secret Private right Will of the owner Will of the owner Determined by a trade secret owner of their own accord Civil liability Criminal charge

22 The criticism concerns: China s law can classify as state secrets any information under extremely broad criteria, especially including information that is related to economic and social development, as well as a non-specific other matters category; National and local officials are allowed to decide after material has been published whether it is a state secret, and those determination cannot be legally challenged; There are some abuses built into China s state secrets laws. during the investigatory stage of state secrets proceedings, the Criminal Procedure Law bars suspects access to lawyers pending investigator s approval.

23 In July, the National People s Congress, China s parliament, released a draft revision of the Law on Guarding State Secrets for public feedback agencies, units are asked to regularly review state secrets and to promptly declassify classified documents that do not need to remain confidential.

24 2. The Function and Status of Criminal Penalties in the Protection of Trade Secrets

25 - The ambiguity regarding the definition of serious loss if the infringement has caused the right holder to suffer a loss exceeding the sum of 500, 000 Yuan a serious loss of the right holder shall be established If the infringement has caused the right holder to suffer a loss exceeding the sum of 2.5 million Yuan extremely serious consequences shall be identified. - The way to count the serious loss is lacking in rationality

26 3. The Legal Nature of the Employee s Obligation of Confidence in respect of Trade Secrets and Non-Competition Obligationt

27 Issues Whether the confidentiality obligations and non-competition obligations of employees during and following employment is statutory or contractual in nature? Can the ex-employee disclose the confidential information exclude trade secret of their previous employers if no clear reference has been made in the employment contract to the obligation of confidence?

28 Conclusion Three Policies The protection of the moral and material interests resulting from any scientific production and work of which he or she is the owner of business information with property rights Social policy of business ethic fair in order to maintain fair competition in the market Social policy of freedom of contract

29 Conflict of Interests The public rights of the free circulation of information and right of free access to information The need of workers for a livelihood and the freedom to work The realization of substantive justice of agreements not to compete following employment.

30 At any time, the system for trade secret protection should be based on reasonable principles and should achieve harmonization of certain interests

31 The trade secret law must be: (1) Balance between the monopoly interests of trade secret holders and the right of the free circulation of information and the right of free access to information (2) Balancing of the protection of trade secrets and the basic rights of employees (3) Realization of fair competition through the protection of trade secrets (4) Harmonization of substantive fairness of contracts and trade secret protection

32 Thank you!